Which of the Following Statements Is True

question 3

Multiple Choice

Which of the following statements is true?

• A) Financial leverage should not be considered when a firm borrows money.
• B) Under the right circumstances, the use of borrowed money can improve a firm's return on owners' equity.
• C) There is no good reason for a firm to borrow money when it has cash to finance expansion.
• D) The use of borrowed money always reduces a firm's return on owners' equity.
• E) Return on owners' equity is not an important financial calculation.

Understand profit maximization and loss minimization strategies for firms in competitive markets.

Grasp the significance of fixed and variable costs in determining a firm's production decisions.

Recognize the role of marginal cost in a firm's decision to continue production in the short run.

Differentiate between short-run and long-run operational decisions for firms.

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Definitions:

Standard Deviation

A procedure for calculating the extent of dispersion or variability among a group of data values.

Range

In statistics, the difference between the largest and smallest values in a dataset, describing its spread.

IQR

Interquartile Range, a measure of statistical dispersion being the difference between the upper and lower quartiles.

Stem-And-Leaf

A graphical method used to display quantitative data in order to assist in visualizing its distribution.